By Joel Jose and Arsheeya Bajwa
(Reuters) -Tesla shares fell nearly 8% on Monday after CEO Elon Musk’s plans to launch a new U.S. political party reignited concerns about his commitment to the company’s future as it struggles with declining sales.
Musk unveiled the ‘America Party’ over the weekend after a public dispute with President Donald Trump on the tax-cut and spending bill. Trump, once an ally of Musk, called the latest idea “ridiculous”.
Trump had threatened to cut off the billions of dollars in subsidies that Musk’s companies receive after their feud erupted into an all-out social media brawl in early June, wiping off $150 billion in Tesla’s market value in a single day.
Musk’s political move comes days after Tesla posted a second straight drop in quarterly deliveries, pressuring its stock which has lost 35% since hitting a record high in December and is the worst performing among the ‘Magnificent Seven’ this year.
“I and every other Tesla investor would prefer to be out of the business of politics. The sooner this distraction can be removed and Tesla gets back to actual business, the better,” said Camelthorn Investments adviser Shawn Campbell, who owns Tesla shares.
Tesla needs to deliver more than one million vehicles in the second half to avoid another decline in annual sales — a tall task due to tariff-driven economic uncertainty and backlash over Musk’s political stance.
The company is set to lose more than $80 billion in market valuation if current losses hold, while traders are set to make about $1.4 billion in paper profits from their short positions in Tesla shares on Monday.
TESLA BOARD IN SPOTLIGHT
Musk’s latest move raises questions around Tesla board’s course of action. Its chair, Robyn Denholm, in May denied a Wall Street Journal report that said board members were looking to replace the CEO.
Investment firm Azoria Partners has delayed the listing of a Tesla exchange-traded fund, with CEO James Fishback calling for the board to evaluate if Musk’s political involvement is compatible with his obligations to Tesla as CEO.
“We pulled the Azoria Tesla Convexity ETF because we have real concerns about Elon’s ability to be a full-time CEO for Tesla with his new full-time job running ‘America Party’,” Fishback told Reuters on Monday.
Tesla’s board, which has been criticized for failing to provide oversight of its combative CEO, faces a dilemma managing him as he oversees five other companies and his political ambitions.
